from the I-get-how-much? dept

Creative accounting from legacy players is nothing new. We have seen many repeated examples of ways in which legacy publishers, labels and producers try to limit the amount of money they pay out to the artists they depend on for their incomes. We have the fact that Return of the Jedi, despite being the 15th highest grossing film of all time, is still not profitable. There is also the crumple zone inducing idea from the major labels that digital sales are licenses except when they are not. So would it be a surprise that we would find a similar situation within the legacy publishing industry?

This lawsuit results from Defendant Harlequin Enterprises Limited, the world’s leading publisher of romance fiction, depriving Plaintiffs and the other authors in the class, of e-book royalties due to them under publishing agreements entered into between 1990 and 2004. Harlequin required the authors to enter into those agreements with a Swiss entity that it created for tax purposes, and that it dominates and controls. However, Harlequin, before and after the signing of these agreements, performed all the publishing functions related to the agreements, including exercising, selling, licensing, or sublicensing the e-book rights granted by the authors. Instead of paying the authors a royalty of 50% of its net receipts as required by the agreements, an intercompany license was created by Harlequin with its Swiss entity resulting in authors receiving 3% to 4% of the e-books' cover price as their 50% share instead of 50% of Harlequin Enterprises' receipts.

What this means to the authors can be illustrated by an e-book with a hypothetical cover price of $8.00. The “net receipts” made by Harlequin Enterprises Limited from the exercise, sale or license of e-book rights would be at least $4.00, of which authors would be entitled to $2.00 based on their 50% royalty. Computing the “net receipts” based on the “license” between Harlequin's Swiss entity and Harlequin Enterprises, Plaintiffs’ 50% royalty amounts to only 24 to 32 cents.

Basically, these authors are just not happy with these reduced royalty rates. The authors claim that Harlequin Switzerland was set up for no other purpose but to syphon out as much money as possible before calculating any royalties for the authors. Hardly something that any publisher should do if they actually care about their business.

There was once a time where such a tactic would not have reached the point of a lawsuit. There was a time when publishers actually had a strangle hold on publishing and could force any terms they could conceivably get away with. However, with the introduction and proliferation of self publishing, that stranglehold is weakening. As authors are looking at the deals they are getting from publishers vs the deals self published authors are getting from the likes of Amazon and even Apple, they are beginning to lash out.

Of course, if Harlequin were smart about this, meaning it realizes the mistake of using such accounting methods, it would seek a quick settlement that results in the authors getting paid their proper royalties. If for some reason, as many publishers claim, it cannot afford to pay authors the true 50% then it will see a quick decline of new authors and a drop off of existing authors. Then, it will fail.

from the how-dare-you-give-customers-what-they-want dept

Kevin Cummings writes in with the news that romance novel publishing giant Harlequin is setting up a new ebook division to offer digital books directly from the company's own websites, as well as via various online retailers. That, by itself, isn't a huge surprise these days, but the article does note that the publisher decided to go without DRM on the books. Now, that seems like a smart, consumer-friendly move that should be applauded. However, the reporter who covered the announcement claims this move is "troubling," which seems like an odd statement. How could treating customers with respect be "troubling"?